For a more balanced economic development

We need to adapt our economic model to make it more socially progressive in a bid to make it as much inclusive as possible — By Anil Gujadhur

The arguments that are usually brought out against the perceived stagnation of economic growth are typically low investment, bad or inadequate government policies, limited external market outlets and precarious domestic employment. One should perhaps ask oneself the question as to whether ‘economic growth’ by itself is what one should go for.

Would it be enough to make the national cake larger and larger each year to promote the country’s economic well-being? What if the cake actually became larger but when we sat at the dining table, it was a situation where a handful of the biggest wealth owners had two-thirds of it placed exclusively on their plate while the remaining population had only a third of it to share howsoever unevenly as they could amongst themselves, based on how well they compete against each other for a share of it?

It is the kind of situation that led global leaders in the post war period to talk of economic development just as much as about economic growth. For, at the base of economic principles, there are also concerns about equity and social policy. Economics doesn’t stop at considerations such as efficiency, incentives, property rights and monetary and fiscal prudence. It looks to sustaining stable conditions to improve general living standards.

Concerns about equity and social policy – economic development – caused leaders of society to approach economic production from different angles: how should redistribution be done to achieve a better social balancing; how much control should governments have to provide the right social infrastructure; what should be the quality of public decision-making to create wider opportunities and a higher standard of living for those least endowed, and whether collective modes of production should be encouraged to strike a balance between the haves and have-nots. It is the context in which cooperatives and trade unions came on the stage as countervailing forces to ensure that the benefits of development percolate to various strata in society.

This model worked to uplift the lives of large swathes of people across different parts of the world, keeping otherwise inevitable popular insurgencies at bay. However, this model did not reckon with the hunger for personal power of quite a number of the emergent leaders of ex-colonial countries. In collusion with cronies and even past colonial masters, they failed to transform the economic apparatus of their countries to the required level, content with making superficial counter-productive changes thus ruining the lives of their own compatriots.

The rise of neoliberalism

There took place reactions against the socialistic post-war model of development. This took the shape of neoliberal economic policies. neoliberalism’s typical recommendations were and still are: the state which had grown too large and unwieldy should be curtailed; greater efficiency can be gained by increasing privatisation of public assets; there should be incentives given to the private sector and less of state regulation; markets should be given a free hand to determine the shape of public policies. Presumably, all will beautifully fall in place to the satisfaction of all.

From the 1980s when this new wave of neoliberalism began up till now, there have been a number of benefits from adoption of this new doctrine: large numbers of people in secular poverty were removed from the poverty trap in diverse countries; finance was able to flow freely across countries to support projects and hence give employment to workers in different places; international trade flourished along with the free movement of capital, guaranteed against expropriation. Public welfare increased generally.

But once the crisis hit, as in 2007-08, the deep inequities this system had hidden came into full view: huge income and wealth inequalities it had created; the enormous power it had given over public institutions to private developers; the vulnerability to which it had reduced workers; the indecent power vested interests had acquired over the public interest to the point of telling governments what they should do to please them rather than the other way around.

Reaction

Now, does this situation mean that neoliberalism has come at the end of the tether and that it can only deliver more unfairness and greater vulnerability to society in future? Does it mean it should be repudiated and replaced by something new and altogether revolutionary?

No. Despite advances made by advocates of the neoliberal approach in Mauritius, we managed to preserve the welfare state, notwithstanding doubts cast about its sustainability the way things have been going on in past years. What this means is that the country can make a more balanced strategy by sticking to market principles, the rights to property and freedom of economic enterprise but not by risking the economic participative factor of all.

The model we’ve worked on has, thanks to public policies, had regard for public welfare but it has not taken at the right time the initiatives needed to redress the balance which kept tilting in favour of the few who kept empowering themselves. In this low-sharing model of social development, the most vulnerable and left-behind have been mostly left to fend for themselves becoming victims of this rat race to personal enrichment à outrance by a few. This can be corrected without throwing overboard the free market model. That is what we can call ‘economic development’, not the sheer pursuit of ‘economic growth’.

The question is: is it possible to reset the balance, without having to go back to the socialising state policies of the post-war period? Yes. There are examples of countries which, during the years of economic neoliberal prosperity, have made for a better sharing society. China stands out for having extricated the largest number of poor people out of the clutches of misery. While authoritarian from the top, it still made for private enterprises to get to serious business – within China and with the whole world outside – while maintaining inclusive social stability relying on mixed forms of property ownership between local authorities and incentivized profitable enterprises.

Experience from other countries shows that they have harnessed the neoliberal system to their own economic and social circumstances and reaped the benefits of growth and development it confers. Taxation, labour relations and legal practices are not homogeneous but have been ironed out by several countries to suit their progress.

For example, the public sector occupies between one third of the economy in South Korea and almost 60% in Finland, both OECD countries which have delivered on the social front. In Switzerland, only 16% of workers are members of trade unions but as much as 86% of them are unionized in Iceland, both having taken advantage of neoliberalism at their distinct paces. In France, labour laws put numerous obstacles before employers can fire workers but in the US, employers can do so at will. All have maintained their economic advantage.

In Mauritius, we need to adapt our model to make it more socially progressive in a bid to make it as much inclusive as possible. We need not do so necessarily by giving one-off state support at the cost of quality management of the public finances and courting risk of future untenable breakdown. But we can empower a larger number of new entrepreneurs in distinct newer fields of activity, building specific human resources for the purpose. It is certain however that we cannot expect to pluck ripe fruits from trees unless we plant them in the first place.